Analysis & Opinion

NEW YORK, August 18 (Reuters) - The origins of a vitriolic
battle that has pitted billionaire hedge fund manager Bill
Ackman against rivals such as Carl Icahn, Dan Loeb and George
Soros can be traced back to a routine event in the world of
investor activism: The unveiling in late December of Pershing
Square Capital Management's bearish bet against Herbalife Ltd
.

Hedge fund industry sources said the timing of the
three-hour presentation - less than a week before Christmas -
riled other investors and brought out into the open festering
resentment against Ackman, already seen by some as too arrogant
even for the alpha-male world of hedge fund managers.

The source of the frustration was the instant - and so far,
ephemeral - boost Pershing Square got by publicizing its bet
just as the year was ending. The Dec. 20 presentation led to a
21 percent plunge in Herbalife's stock. That meant Ackman's $1
billion wager helped his $11 billion hedge fund gain 5.8 percent
that month, and end the year up 12.4 percent. The results were
far better than average for hedge funds last year, which matters
in an intensely competitive world where strong performance
begets fees as well as fame.

A Pershing Square representative said on Friday the timing
of the Herbalife presentation before a crowd of 500 was dictated
solely by when the firm completed research for laying out its
argument that the nutritional supplement manufacturer is a
pyramid scheme. Herbalife's shares have soared 97 percent this
year, costing Ackman more than $300 million in paper losses, but
the hedge fund is sticking by its bet. Herbalife has repeatedly
denied Ackman's claims.

The Pershing Square representative, when asked about
criticism of the event's timing, said: "Our strong preference
would have been to do that presentation earlier."

Icahn, who has said he finds Ackman too arrogant for his
taste, took a 16 percent stake in Herbalife shortly after
Pershing Square announced its short position, and has not wasted
any opportunity - on TV or in other media - to take Ackman to
task over the event. Soros' firm recently bought 5 million
shares of Herbalife and Third Point's Dan Loeb made hundreds of
millions early this year buying and selling the stock.

When asked in an interview with Reuters about the feud and
why other managers keep joining the fray in criticizing Ackman
of late, Icahn said: "Huh? In recent weeks? What's changed?"

Ackman drew a fresh round of criticism earlier this month,
including from Starbucks Corp CEO Howard Schultz, after
he launched a public fight with the board of struggling retailer
J.C. Penney Co Inc, where Pershing has been invested for
nearly three years, mounting an unsuccessful campaign to make
the retailer appeal to a more upscale audience. The fight ended
with Ackman resigning from the board last week.

These battles underscore what has been a rough year for
Ackman, one of the more closely followed names in the $2.25
trillion hedge fund industry. Pershing Square is up just 2.6
percent as of mid-August, short of the average 4.21 percent
return for the hedge fund industry and the 16.61 percent gain in
the Standard & Poor's 500 Index. The paper losses registered by
the fund on Herbalife and Penney have taken the biggest bite out
of performance.

These battles are raising questions in the industry about
Ackman's style of investing, which employs a combination of
theatrics and behind-the-scenes work with corporate boards to
advocate for management and strategic changes.

"Ackman is a good example of 'It is OK to be the smartest
guy in the room, but it may not be the best idea to tell
everyone that you're the smartest guy in the room,''' said
Jonathan Kanterman, an independent alternative investment
consultant. "People can get a little turned off by that."

Supporters maintain it can be easy to mistake
self-confidence for arrogance. Ackman has bounced back from
setbacks before, and his reputation is based on some rather
spectacular successes.

In 2011, for example, the investor took a big stake in
Canadian Pacific Railway Ltd and, within two years, made
a $2 billion profit after forcing board and management changes.
Before that, he turned a $60 million investment in mall operator
General Growth Properties into a stake now worth $2.3 billion.

Hedge fund manager John Hempton, who has taken the other
side of Pershing Square on the Herbalife trade, said he thought
Ackman was "incredibly smart and profoundly stupid."

"When he is smart, he is smarter than me. And when he is
stupid, he is aggressive about it," said Hempton, the chief
investment officer of Bronte Capital Management.